Who Wouldn’t Want To Sue Bank of America?

August was kind of rough for Bank of America on the legal front, to the point that we once said in Write-Offs “Everybody who hadn’t yet sued BofA did today, or will soon.” But that turned out to be wrong! Or at least, it underestimated the continuing appeal of suing Bank of America, because now not only is everyone who is not Bank of America suing Bank of America, but so is Bank of America:

[I]n Florida’s Palm Beach County alone, Bank of America has sued itself for foreclosure 11 times since late March, according to foreclosure fraud activist Lynn Szymoniak, who forwarded one such foreclosure filing, dated March 29, 2012, to The Huffington Post. … In the March 29 filing, Bank of America is seeking to foreclose on a condominium and names the condo owner and Bank of America as defendants in the suit. The company is literally seeking damages from itself in order to foreclose on the condo owner.

Ha ha ha but why is Bank of America a delinquent condo owner? Because of course it’s not; it’s the second lien holder:

“We are servicing the first mortgage on behalf of an investor and we own the second mortgage,” Bank of America spokeswoman Jumana Bauwens told HuffPost. “Naming the second-lien holder in the suit is necessary to eliminate the junior interest,” Bauwens said.

Then there is a lot of blather about robo-whatever and lack of adversary (short answer: no) and “I’m sure the paralegal who did this did 100 others that day,” which, maybe, but I submit to you that no matter how robo a BofA paralegal you are you do notice when you are repeatedly suing yourself.

So, I am no foreclosure lawyer, but this all seems pretty straightforward to me. The plaintiff BofA is just the servicer of a pool of mortgages and is acting as representative of the owners of that pool. The defendant BofA is BofA, and is acting as representative of BofA. The pool investors and BofA are different, and there is a finite amount of blood to be extracted from this stone, and the investors want that blood to go to them, and not to BofA, and the BofA representing them is trying to make that happen. That is, in the tiny narrow context of this story, a good thing: you want the servicer to represent the investors even at the cost of its own interests, not to throw them under the bus. You want your bank to act on behalf of its clients, not call them muppets and steal their money for itself.

There is a lot of foreclosure badness but I continue to just lack the chromosome that causes people to get really angsty about foreclosure-process formality. There’s this automatic filter where anything that happens is assumed to be banks being stupid or assholes or stupid assholes, and so just as banks are ruthlessly criticized for failing to follow the formalities in robosigning cases, here BofA is criticized for being too formalistic. So one law professor says “It is a little bit mindless on the part of the lawyer. They don’t need to sue themselves,” and sure, maybe, they could not name themselves in the suit and just submit to the court “the second lien holder has worked out a deal with the representative of the investors, because they’re the same entity,” but wouldn’t that deal look suspicious? Doing deals with yourself, where one bit of yourself is running your own money and the other bit of yourself is representing outside investors, is the sort of thing that gets you in trouble.

Anyway, this story is mostly pretty harmless and amusing at BofA’s expense and there’s nothing wrong with that. But you could worry a bit about the roboticism. We don’t know anything about these cases other than that BofA is on all sides of them – don’t know, for instance, whether a loan modification or principal write-down could have helped avert foreclosure. But let’s just blithely assert that Less Foreclosure Is Good, which, I mean, it probably is for homeowners, and that there was some possibility of keeping these homeowners in their houses by reducing some of their payments, which we know included payments on at least two home loans. Presumably BofA’s second-liens are going to zero on these foreclosures so they had every incentive to push for modifications – indeed, a modification that wrote their second down to $1 is probably better than foreclosure. But that didn’t happen: the seconds are still outstanding, and BofA is foreclosing and suing itself over them. This – conjectural – failure by BofA to help homeowners and advance its own interests may come from legal concerns around the conflicts between its interests and its servicer position. More realistically, though, it’s because BofA is a bunch of robot paralegals running around suing themselves.

As a consultant who fixes poorly operating companies, let me just say that the very first step to solving a company crisis is to determine where all the dumbassery is happening and then stepping in and stopping it.

"banks are…criticized for failing to follow the formalities in robosigning cases"

Also known as forgery, perjury and systematically committing fraud on the court.

Regardless of the substance of the underlying matter, that is grossly wrong. "But there are just so many, we have metrics to meet, we're so busy, everyone else is doing it, we didn't price servicing correctly so we have to", cry the servicers and their scumbag foreclosure firms.

"Regardless of the substance of the underlying matter, that is grossly wrong"

Oh, bullshit. The substance of the matter is that foreclosures are happening on a massive scale because people stopped making their house payments on a massive scale. Ignoring that fact and pretending that these procedural issues are allowing banks to foreclose on people who made their payments and should be allowed to stay in their homes is specious nonsense.

Except that it's not nonsense.
In a (statistically) significant number of cases, banks did, and do foreclose on people who have paid their mortgages, or didn't have mortgages in the first place, Sometimes they stole parrots.
The mortgage holders (banks) knowingly evaded the processes in place to prevent this from happening.
That is fraud, and a criminal offense.
That's the subject of the matter.

Arthur Dunlop…LISTEN UP! That is exactly what is going on with our mortgage right now. In fact, we tried to make a payment and just today received notice they are sending our check back. Why??? Since we closed on a refinance in Dec 2011 BofA has been trying very persistently to bully us into a "modification". How?? We recieved a new loan number, a new payment amount, BofA closed our original loan filed the deed of trust on the new loan and then BofA took it back without our knowledge based on a delinquent payment that was only delinquent because THEY posted it 17 DAYS AFTER WE PAID. And today they won't accept my money, Specious nonsense? Maybe true in some cases. In ours…we are dealing with straight up criminal behavior.

BAC is getting yanked around all day with the Dow – down during the losing streak big and then shooting back up today – wonder how shaken up it will be by the end of the week after this news. I thought this summary of the Bank of America issue above was interesting and along with it I'v been following the financial news website MarketSnacks too because it provides quick, interesting, daily summaries of what happened in the markets. I thought their post yesterday on how the markets are back up was pretty clever and helps explain a few things:http://marketsnacks.com/2012/04/11/after-worst-lo…

Nick, I am a big fan of Market Snacks too. Their donuts are fresh and the buy one churro get one free special on Fridays is insane! How about a big shout out for Aadesh and his brother Sanjay for making that place so special.

Relative game comment sounds like pr straight from ir talking points to me written by an underpaid res associate rather than an honest opinion of what matters: will financing costs for banks rise and will corporates that have stronger ratings than the banks wake up and disintermediation

SAC

Mary Jo White was the top federal prosecutor in New York City during Bill Bratton’s first run as the Big Apple’s top cop, and she learned a few lessons from his “broken windows” theory: Clean a place up a little, and throw the fucking book at the street urchins who are messing things up with […]